Mortgage Interest Rates Suddenly Jump

Pushed by weakening economic data, mortgage interest rates, already near historic lows, jumped slightly for the week to 4.50% on a 30-year fixed rate mortgage, according to Freddie Mac. The jump of only 0.01 came after rates dropped for eight straight weeks. But rates declined slightly on other loans for the week.

The subtle change in rates followed a steady drop on Wall Street, suffering from growing doubts about the U.S. economy. The fixed 15-year mortgage averaged 3.67%, a minor drop from 3.68% a week ago. A year ago the same loan was 4.20%. The 5-year adjustable rate mortgage also dropped a slight one-hundredth of a point to 3.27%.

Low mortgage bond rates are contributing to the low interest rates, which have been on a steady decline until this week. High unemployment and weakness in the economy along with the Fed keeping its bench-mark lending rate at or near 0 has kept mortgage lending rates from rising much.

During the first four months of the year average monthly sales of existing homes had a jump of about 5% over the pace a year ago. However, low job creation at 54,000 workers for the month of May in the U.S. and growing unemployment hinders the economy.

First quarter data from Freddie Mac indicates that house price softness is causing some potential home buyers to wait for clearer signs home values have bottomed out. Mortgage debt levels continue to decline as homeowners refinance mortgages and pay down debt levels and millions of mortgage holders are foreclosed.

Household balances fell more than $930 billion between the peak in March 2008 and March of this year. Second mortgages and lines of credit accounted for $820 billion of the decline.